The market for hard disk drives (HDD) contracted in the final quarter last year after failing to receive a boost in demand from PCs, according to IHS iSuppli analysts.

HDD shipments fell to 135.8 million units, down 2.4 percent from 139.2 million units in the third quarter of 2012, the research firm said. Total revenue slipped to $8.4 billion, down 3.4 from $8.7 billion. Western Digital was the top HDD supplier in both shipment and revenue terms, followed then by Seagate Technology and Toshiba.

The quarterly decline in the HDD space was due to anemic demand for PCs as a whole, and excess inventory carried over from the earlier quarter also did not help.

Overall, PCs have been losing ground to smaller, more nimble devices. Both desktop and notebook PCs are being passed over by consumers in favor of flashier gadgets like smartphones and tablets, while the corporate and enterprise sectors are extending PC replacement cycles as businesses continue to remain cautious. Meanwhile, Ultrabooks and other ultrathins have not taken off as expected, delivering a further blow. And as media and PC tablets use rival forms of storage like flash or solid state drives, even more opportunities are being taken away from the HDD market.

Still, hard disk drives have the lowest cost of any storage medium on the market, which means they will remain the final destination for the majority of digital content.

In particular, HDDs will continue to play a major role in storage for both the public cloud in the enterprise sector, and for the private cloud in the consumer electronics segment. And while the HDD industry is experiencing a setback for the time being, with results for the first quarter this year likely to be soft as well, growth will return in the long term, IHS iSuppli believes.

Western Digital was the top HDD supplier in the fourth quarter, even though its total was down 5.2 percent quarterly to 59.2 million units. Revenue amounted to $3.8 billion, also down by 5.2 percent. Western Digital was the market leader in desktop HDDs during the period?the first time it has taken the crown in the desktop HDD space, most likely because the higher pricing of Seagate, especially in the 2-terabyte product line, finally shifted consumer preferences toward the less expensive offerings of Western Digital.

Seagate, despite being No. 2, was the only supplier that saw growth in shipments, up 1.5 percent to 57.6 million units. Revenue reached $3.7 billion, down 5.2 percent similar to the rate of revenue decline suffered by Western Digital. Seagate lost the desktop HDD crown, but it retains the No. 1 position for unit shipments to the enterprise, just as the company bumped off Western Digital from the notebook HDD peak, its traditional bread-and-butter. Seagate executed better than Western Digital in its strategy for notebook HDDs, increasing its shipments at precisely the time that Western Digital?s own notebook HDD shipments were declining.

Toshiba, the No. 3 player, shipped 18.4 million HDD units, down 3.3 percent. Revenue equated to $920 million, down 3.3 percent as well. Toshiba entered the desktop HDD market in the third quarter last year after merging with Hitachi, and the merger has helped boost its share of the overall desktop HDD space.

Based on projections, Western Digital is likely to remain the market leader in both shipments and revenue during the first quarter this year.